Economist, Dr. George Domfe has said that the Bank of Ghana is veering too closely to the policies of the government and called into question the central bank’s institutional independence over recent monetary operations and balance sheet decisions. “Bank of Ghana now sees itself as a political agent of the ruling government,” Domfe added. “They are doing serious bidding of the ruling government and that is where I have a problem.”
At the time of his remarks, he was in the process of his interview with The Forum on Asaase Radio, where he also chastised the bank for its reliance on open market operations and gold transactions to help manage its finances. Domfe contended that the central bank has acted to deflect what he referred to as a policy insolvency risk by having to generate more revenues to address growing operational costs. “Some even said Bank of Ghana, realising they were going to be policy insolvent, need to generate enough revenue to cover the cost of open market operation,” he said. ”If it is not able to do that then it is policy insolvent and that would be catastrophically bad.”
The bank sold in excess of 19 tonnes of gold in the period under scrutiny, and its operation helped bolster its cash flow, he said. “In an effort to avoid that kind of tag, they sold over 19 tonnes of gold,” he said, noting that the transactions produced a profit of GHC9.57 billion profit after costs. Without gold-related gains, Domfe said, the Central Bank’s revenue from operations of roughly GHC12 billion would not be good enough to meet an estimated GH¢15.7 billion in open market operational costs.
He also further argued that the financial impact may have been much larger had the bank not offset the gap. “In other words, they became a revenue if they deduct the total cost of the purchase from the sales, and they had a profit of 9.57 billion cedis,” he said. “If they had not sold gold and were policy insolvent … the overall loss would have been in the vicinity of 44 billion cedis,” he said. Domfe also asked whether monetary policy should be explained by these improvements in Ghana’s reserves, and believed that greater inflows of gold emerged from higher global prices and high volumes of production.
Editor:
Obiri-Yeboah
